Analysis on Trademark Dilutions in US & EU

An Analysis on Trademark Dilution in US and EU

‘Did you sleep well?’, Enquired Mr. S while sipping a steaming cup of latte in her client’s office. Mr. P, the client, replied indifferently ‘I don’t think I would be able to rest my eyes until we get a grip over this dispute. Our trademark represents the leather goods of a well-reputed company in the US. We’re as lucky as it gets in this industry! The other party is manufacturing chocolates under a similar mark; that ought to confuse the public. They’re stealing our thunder, I’d say! However, I’m losing hope since their mark is not identical to ours.’ Mr. S put away his cup with a slight grin and insouciantly said, ‘You should try to get some rest and stop worrying about the status quo. The degree of similarity between the marks is not the sole factor that the court will consider while determining a case of trademark dilution. We will need to establish that consumers who purchase their chocolates would be misled, given the popularity of your company! However, we may also have to prove a downfall in the business’s profits to win this over!’. ‘Well then, this is a clear case of trademark dilution,' P diffidently murmured as he walked out onto his office corridor.

Hopefully, one might be able to anticipate the judgment of this dramatic illustration with more than just fictional creativity by the end of this article. The desideratum of companies to exhibit their stand in the industry by registering a trademark has led to numerous disputes like that of the unfortunate leather company above. Companies attempt to imitate famous marks of internationally recognized brands (such as Coca-Cola and Apple) onto different goods (like fashion goods and cars, respectively) to upset the peculiarity or mistake the popularity of the famous mark. Hence, the general concept of trademark dilution revolves around the capacity of a mark to signify a particular source or owner. However, the relative novelty of the concept and variation in law and protection that it offers raises considerable uncertainty among trademark holders in a dispute of dilution.

In Line with American Laws

Before 1996, the disputes regarding trademark dilution in the United States of America (US) operated under the Lanham (Trademark) Act of 1946 (the Lanham Act). Section 43 of this statute imposes civil liability on persons who uses a falsified term, or a represents misleading facts on any goods or concerning any services and regarding trademark dilution. However, the Lanham Act failed to address the growing issues that were surrounding dilution of trademarks. Owners of famous trademarks were more likely to face considerable losses if other companies were permitted to bask in the glory of the former’s trademark. Further, globalization and escalation in the number of players in domestic markets led to a rise in many disputes concerning trademark dilution and the subsequent need for a dedicated statute that would deal in trademark dilution. Ergo, the Federal Trademark Dilution Act of 1995 came into force with the view to enhancing the protection offered to owners of famous trademarks by fabricating the much-welcomed Section 43(c) into the Lanham Act. This sub-section recognized the concept of trademark dilution and the underlying needs to protect the significance of a famous mark from being diluted. However, the courts were facing substantial inconsistency in establishing the burden to prove since the proof of actual dilution through economic injury could create certain ambiguity. The amended statute was also not comprehensive enough since it had not laid down any provisions regarding actual dilution and the likelihood of dilution. Hence, the Trademark Dilution Revision Act (the Dilution Act) was passed in 2006 with the view to provide certain and consistent provisions surrounding burden of proof in dilution cases.

The enactment of the new Dilution Act was greeted with a smile by the owners of famous trademarks as it overcomes all the legal hurdles of the past by distinctly stating that dilution of a trademark could trigger by proving a likelihood of dilution. This new Act was a huge leap in the country’s trademark laws since it would confer protection against those marks that were likely to cause dilution. Ergo, plaintiffs were no longer required to go through the absolute and non-viable necessity to prove actual dilution. This succored owners of famous trademarks to preclude dilution at its inception. The Dilution Act has further distinguished between dilution by blurring and dilution by tarnishing. A famous mark is said to dilute by blurring if the use of an identical trademark impairs the distinctiveness of the former. Such a situation arises when the famous mark creates a positive response among the consumers by which they relate both the brands to a single source. On the other hand, a mark is diluted by tarnishment if the owner of a famous mark would suffer some negative associations because of the other party’s use of an identical or similar trademark. However, the application of this statute ultimately depends upon the interpretation techniques employed by the courts.

The US Court of Appeals for the Second Circuit (the Second Circuit) reversed the judgment of a district court after determining the degree of the requirement of substantial similarity between a famous mark and an allegedly infringing mark. In the landmark case of Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., leading coffee retailer Starbucks sued the domestic coffee manufacturer Wolfe’s to obtain an injunction over a claim of trademark dilution. The plaintiff alleged that the defendant’s use of its marks bearing the term ‘Charbucks’ amounted to dilution by blurring. The district court ruled the case for Wolfe’s by stating that there was no substantial similarity between the famous ‘Starbucks’ trademark and the defendant’s trademarks. However, the Second Circuit reversed the judgment of the district court and stated that the Dilution Act did not specifically require the marks in a trademark dilution dispute to be substantially similar to each other. The appeal court also observed that the Dilution Act did not encompass any word such as ‘identical,' ‘nearly identical,' ‘substantial’ or ‘very similar’ and further stated that the similarity between the marks is just one of the non-exhaustive parameters in a dilution dispute. Subsequently, the case was remanded to the district court which later dismissed Starbuck’s dilution claim by stating that the degree of similarity between the marks was minimal as used in commerce.

The European Style

Unlike the US, the European Union (EU) does not have a dedicated statute or directive that protects that owners of famous mark against dilution. However, Articles 4(4)(a) and 5(2) of the EU Trademark Directive have embedded a similar approach to protect the interest of the trademark that has a reputation in the concerned Member State. The clause has denied the registration of any trademark that is similar or identical to an earlier reputable national trademark that represents different goods or services and could cause the later mark to take undue advantage or be detrimental to the distinctive character or the repute of the earlier mark. However, the EU Trademark Directive has not considered terms such as ‘dilution’ and ‘famous’ to elucidate on the ambit of the clause. Ergo, the provisions regarding trademark dilution in the European Union is comparatively ambiguous as well as flexible. Therefore, the courts play a significant role in determining the authenticity of trademark dilution claims in the continent.

In the infamous case of Intel Corporation v. CPM United Kingdom Ltd., the European Court of Justice (ECJ) interpreted the ambit of Article 4(4)(a) with the view to determine the factors that are required to establish a case of trademark dilution. The plaintiff was a well-known company that produces microprocessors and owned various marks in the United Kingdom (UK) and European Union that consisted of the word ‘INTEL.' Whereas, the defendant was the proprietor of the national mark of the ‘INTELMARK’ in the UK. Intel Corp. contended that the other party's use of its disputed trademark would take unfair advantage of or be detrimental to the distinctiveness of their trademark per UK’s Trade Marks Act, 1994 which was enacted to implement the EU Trademark Directive. Initially, the plaintiff filed a complaint with the UK Trademark Registry against the use of the defendant’s trademark and was unsuccessful. Subsequently, Intel Corp. submitted an appeal to the High Court of Justice of England and Wales which however the courts dismissed. The plaintiff then instituted the next appeal with the Court of Appeals; which observed the similarity between the trademark of both the parties. However, the Court of Appeals stayed the proceedings of the case pending reference to the ECJ since the court could not determine the extent of dilution and circumstances when protection could confer. Consecutively, ECJ analyzed numerous domestic and international factors to determine the link between the marks of both the parties. Further, it laid down the following factors to consider while assessing the existence of trademark dilution:

i. the degree of similarity between the marks;

ii. nature of goods or services for the trademarks registered;

iii. the level of reputation of the earlier mark;

iv. the degree of distinctive character of the earlier mark; and

v. the probability of the existence of a likelihood of confusion among consumers.

Further, the ECJ also stated that the plaintiff was conferred with the burden to manifest the level of injury that has occurred or the risk of injury that could eventuate in the future. The owners of an earlier reputable mark would have to show the economic damage that caused due to the other party’s use of a similar mark. This ruling has set as a landmark case that laid down the factors required to determine trademark dilution.

Conclusion

The concept of trademark dilution is rising with the increase in the number of companies that try to pass off their goods or services as that of another company’s which is popular among the consumers. Protection against trademark dilution primarily intends to prevent companies from exploiting the goodwill and reputation of other enterprises that conduct its activities under well-known marks. Establishing trademark dilution in the EU is more laborious compared to the US due to the underlying requirement to prove economic injury of the plaintiff vide a loss in sales or other economical margins.

The emerging concept of trademark dilution is relatively new in the United Arab Emirates (UAE). Article 4 of the Federal Law Number 37 of 1992 (as amended by Law Number 19 of 2000 and Law Number 8 of 2002) has laid down explicit provisions governing international marks with reputable goodwill. The provision stipulates that the goodwill of a trademark would be determined by the extent of the public’s awareness regarding the same. However, the Article does not provide any explicit protection to the proprietors of famous marks in the event of dilution.

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i. 736 F.3d 198 (2d Cir. 2013)

ii. Directive 2008/95/EC of the European Union and of the Council of 22 October 2008 to approximate the laws of Member States relating to trademarks

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